Core inflation reaches highest point since February 2025
- In July 2025, core inflation reached 2.9%, the highest since February 2025.
- Personal income increased by $112.3 billion, reflecting a 0.4% monthly rise.
- The economy is still not aligned with the Federal Reserve's target inflation rate of 2%.
In the United States, inflation data released on August 29, 2025, revealed that core inflation, excluding volatile food and energy costs, rose to 2.9% in July 2025. This figure marks a 0.1% increase from June and is the highest annual rate recorded since February. The data was gathered from the Personal Income and Outlays report released by the Bureau of Economic Analysis, which serves as the Federal Reserve's favored gauge of inflation. This report assists policymakers and economists in assessing the economy’s health and inflationary trends over time. The Personal Consumption Expenditures (PCE) price index showed a monthly increase of 0.3%, aligning with market expectations. Personal outlays, which denote the total of personal consumption expenditures, personal interest payments, and current transfer payments, rose significantly by $110.9 billion in July. Notably, personal savings reached $985.6 billion, leading to a personal saving rate of 4.4%. The rise in personal income—amounting to $112.3 billion or 0.4%—was mainly attributed to increased compensation levels across various sectors. The increase in disposable personal income, defined as income after personal taxes, also showcased a 0.4% rise, equating to an increase of $93.9 billion. This trend highlights that households had slightly more income available for spending after fulfilling tax obligations. Many economists and policymakers highlight core inflation, given its capacity to reflect long-term trends by excluding the fluctuating prices of gas and groceries. Despite ongoing efforts to stabilize prices, the current figures indicate that the economy still lags behind the target inflation rate of 2% set by the Federal Reserve. Given these dynamics, central bankers are likely to continue monitoring inflation indicators closely to guide monetary policy decisions. As inflation remains at elevated levels, implications for future interest adjustments and broader economic policies are a point of concern among investors and consumers alike.